Keeping Business Records
Good business records are not only the backbone of your business for reporting tax obligations, but are also imperative for management and improvement purposes.

 Main Considerations

• What are my options for ways of keeping records?
• How detailed do my records need to be?
• What is the most cost effective record system for my business?
• What is the most efficient system for my business?
• How much time do I want to spend keeping records?
• What do I have to record correctly to comply with the tax office? 

RECORD KEEPING OPTIONS 

The main options available for ways to keep your records are:

• Manual cashbook / bank statements
• Accounting software program – yourself or by using a bookkeeper (eg MYOB or Quicken)
• Using your accountant – supplying receipts, invoices and source documents 

These range from most inexpensive to most expensive, in respect of the above list.  Proportionately, these options also range from the most work for you to the least work for you, and simple to complex, in the same manner.  It’s a simple trade off between what you want to do and what you prefer to pay someone else to do. 

Whichever way you decide to keep your records, the most important start to your record keeping should be opening a bank account that is used strictly for business.  It is important the name of the bank account is the name of your business entity.  The bank account is the first records asked for by the ATO in the case of an audit.   

Accordingly, should anything happen to your other business records, your bank account can be relied upon to construct your transactions as long as it is used strictly for business income and expense transactions. 

HOW DETAILED SHOULD MY RECORDS BE? 

The level of detail of your records should be dependent on what your business does and its structure.  For a simple sole trader subcontractor business, usually the details you monitor are simply income and expenses, and hence a manual cash book may be fine.  If you are operating your subcontractor business through a company, then the complexity steps up due to the compliance of the company structure, and an accounting software system would be more desirable (see our Business Structures fact sheet).  Alternatively if you are a trading business (ie trade stock) then you will require a system that monitors how much stock you buy and sell.  Generally a more complex and detailed record system is required for this. 

Where you start to employ people in any business structure, the level or record requirements increase to record super, withholding tax etc (see our fact sheet what do I have to know to employ someone?).  A simple cash book may not be sufficient to keep these records, and you may find that a software program can more easily and quickly calculate the employment requirements for you, or, where Fringe Benefits tax is involved, you may be better off using your accountant to prepare your records. 

TAX OFFICE COMPLIANCE 

There are many compliance requirements for various situations in regards to your tax records.  The more common areas are however:

• Motor Vehicle records
• Finance records
• Invoicing & Income records 

If you intend to claim any deduction for motor vehicles, you need to keep good records as this is generally a target of ATO enquiry.  Keeping a log book for 3 months of your vehicle’s kilometers and purpose of travel is a good way of ensuring your accountant can claim the deduction you are entitled to (unless your business uses a commercial vehicle).  You also need to keep all your fuel, insurance, registration and repair receipts. 

As there are many varied forms of finance, where any of your loans are used for business, your accountant will need to see a copy of the finance contract to ensure both GST and interest is reported correctly.  This is especially so with motor vehicles as explained in more detail on our Vehicle Financing fact page.  Mixing personal and business loans and finance is highly not recommended as there is difficulty in determining which part of the loan relates to only your business. 

The ATO is especially interested in not only what your income is, but how you keep record of it.  This is in conjunction with issuing compliant tax invoices for GST registered businesses.  Using dates and sequential numbers for your invoices is a good start.  Your income records should also always reconcile with your bank statements as mentioned previously.  This is a good way to check you haven’t missed reporting any income items. 

For more information from the ATO view on record keeping practices, and to use the record keeping evaluation tool, please visit http://www.ato.gov.au/businesses/pathway.asp?pc=001/003/003&mfp=001&mnu=6874#001_003_003  

For more advice on the most suitable record keeping system for your business, please email This e-mail address is being protected from spambots. You need JavaScript enabled to view it or arrange an appointment.  

^{This fact sheet is provided as general advice and does not cover every possible situation and related consequence.  Further investigation should be done in relation to your own particular circumstances with an appropriate professional, and hence Dtax Accountants accepts no liability for actions carried out that rely on the information provided in this fact sheet.}